The main economic system that prevailed in medieval Europe was feudalism. This hierarchical system was characterized by the exchange of land for military service and labor. Lords granted lands known as fiefs to vassals in exchange for loyalty and protection, while serfs worked the land and provided agricultural labor in return for protection and a place to live. Feudalism created a rigid structured society, with a clear class division between nobles, clergy, and peasants. This system largely dominated the socio-economic landscape of Europe until the emergence of centralized monarchies and the rise of capitalism in the later Middle Ages.